Monday, June 9, 2008

This appeal arises from the Bankruptcy proceeding of Baron’s Stores, Inc. (“Baron’s Stores”). For over fifty (50) years, Baron’s Stores was a retailer of men’s clothing. Since 1988, Appellant, Norman Lanson, owned 99% of Baron’s Stores shares. In 1988, Appellant, Meryl Lanson, Norman Lanson’s wife, became owner of the remaining 1% of Baron’s Stores shares. In addition to being Baron’s Stores’ sole shareholders, the Lansons were creditors, guarantors, and employees of Baron’s Stores. [A-1, pg. 2] During the Bankruptcy Proceeding, Appellant alleged that a fraud upon the court was perpetrated by three attorneys and their law firms. The attorneys are Ronald C. Kopplow, Esq. and Kopplow & Flynn, P.A. (collectively “Kopplow”), Marc Cooper, Esq. and Cooper & Wolfe, P.A. (collectively “Cooper”), and Sonya Salkin, Esq. and Malnik & Salkin, P.A. (collectively “Salkin”) (the attorneys and their law firms are referred to collectively as the “Attorneys”).

The company, Baron’s Stores, Inc. (“Baron’s”), filed an accounting malpractice lawsuit in state court against its accounting firm for failing to detect embezzlement from Baron’s by Baron’s chief financial officer. Appellee, Kopplow and Cooper represented Baron’s and its principals, Norman Lanson (“Norman”) and Meryl Lanson (“Meryl”) (collectively the “Lansons”), in that litigation. While that litigation was pending, Salkin filed a Chapter 11 Petition on behalf of Baron’s before the Bankruptcy Court. In order to be appointed general bankruptcy counsel for Baron’s, Salkin was required to file a motion and affidavit with the Bankruptcy Court. Likewise, in order to be permitted to continue the state court accounting malpractice action, Appellees, Kopplow and Cooper were also required to submit affidavits with the Bankruptcy Court. For ease of reference, these motions and affidavits will be referred to collectively as the “Retention Motions and Affidavits.”

Pursuant to Federal Bankruptcy Rule 2014, when attorneys seek appointment by the Bankruptcy Court, they must satisfy very stringent disclosure requirements and disclose the universe of connections and/or conflicts-of-interest, potential or actual, that they have relative to the debtor estate, its creditors, and the attorneys and accountants of those individuals and entities.

The Attorneys failed to disclose a litany of connections and conflicts-of-interest in their Retention Motions and Affidavits. Despite the numerous written demands by Baron’s and its principals to disclose their connections and conflicts-of-interest, the Attorneys still refused to do so. The Appellant was successful in re-opening the Bankruptcy case based on the Attorneys’ fraud on the Court in failing to disclose their numerous conflicts and connections. The Bankruptcy Court ultimately found that the Appellees did not commit a fraud on the Court in error, which was affirmed by the District Court, as further set out below.

B. Course of Proceedings and Disposition of Lower Court

In December 1993, it was discovered that David Peterson (“Peterson”), Baron’s Stores’ Chief Financial Officer, had embezzled more that $3,000,000 from Baron’s Stores over a period of years. As a result of this discovery, the Lansons commenced litigation against the accounting firm of Morrison, Brown, Argiz & Co., P.A. (“MBA”), alleging the firm had committed accounting malpractice when it failed to detect Peterson’s embezzlement as it was occurring. [A-1, pg. 2]

In addition to being Baron’s Stores’ auditor, MBA also provided accounting and financial advisory services to the Lansons in their individual capacities. On January 12, 1994, Baron’s Stores and Norman Lanson, individually, signed an “Authority to Represent” and “Statement of Client’s Rights,” pursuant to which Appellees, Kopplow; Kopplow & Flynn, PA.; Cooper; Cooper & Wolfe, P.A. (collectively “Kopplow and Cooper”), were retained. [A-1, R. 493]. Kopplow and Cooper were employed to represent Baron’s Stores and the Lansons in the claim for damages against Peterson and MBA.

In November 1995, Kopplow and Cooper filed a lawsuit against MBA on behalf of Baron’s Stores. Despite the fact that Appellants, Meryl Lanson, and her husband, Norman Lanson, also had individual claims against MBA, Baron’s Stores was the only named plaintiff. In June 1997, the Lansons sought advice from Kopplow regarding the Lansons’ ability to continue operating Baron’s Stores. Kopplow recommended the Lansons speak with Appellee, Sonya Salkin, an attorney specializing in Bankruptcy law. (A-1, pg 3)

On July 18, 1997, Baron’s Stores executed a Retainer Agreement with Salkin. Upon Salkin’s advice, on September 9, 1997, Baron’s Stores filed a petition for Chapter 11protection. Thereafter, on October 23, 1997, Salkin filed a Motion to Authorize Employment of Kopplow and Cooper as Special Counsel to continue the pre-existing MBA action.

Salkin attached Affidavits of both Kopplow and Cooper in support of the Motion. [R-44; R-532, Exh. 7 and 9]. In these retention Motions and Affidavits, the Attorneys, in violation of the mandatory Bankruptcy Rule 2014 (a) and 11 U.S.C. 327(e), failed to disclose to the Bankruptcy court Kopplow’s and Cooper’s connections and conflicts of interest arising from the fact that, in addition, to representing Baron’s in the MBA action, they continued to represent the Lansons individually in the MBA action. On September 10, 1997, Salkin filed her own Motion to authorize her employment before the Bankruptcy court as counsel for Baron’s, as debtor in possession. [R-4;R-532-Exh.4]. On that same date Salkin filed her Affidavit in support of the Motion.Ultimately, the Bankruptcy court, in reliance upon, the Affidavits of Kopplow, Cooper and Salkin, claiming under the penalty of perjury, that they had no connections and conflicts of interest, authorized their employment pursuant to Bankruptcy Rule 2014. [R #52, 53 & 94]

On January 12, 1998, a Creditors’ Meeting was held at Alan Stuart’s office. [R- 493, 30]. The Lansons and the Attorneys were present. At the Creditors’ Meeting, Kopplow presented a document from MBA’s files, entitled “Items to Be Removed from Baron’s Workpapers.” [R- 493,-10-31]. Kopplow referred to this document as the proverbial “smoking gun”, and exclaimed that he was going to get $10 million from MBA. [R-540-536; R-532-Exh. 19, 10]. Although Kopplow did not concede at trial that he used the term “smoking gun”, he did concede that he told the Creditors’ Committee, at that meeting, that he thought the MBA Action had a settlement value of up to $10 million. [R-539-129,133].

The fact that Kopplow thought the MBA Action had a value of $10 million is significant because he shortly thereafter forced Baron’s to settle the MBA Action for only $2.4 million (i.e. at a 76% discount) in a misguided effort to hide his malpractice in allowing the statute of limitations to expire on the Lansons’ individual claims in the MBA Action. [R-541-587,588; R-532-Exh. 19, 13-14].Ultimately, Baron’s Stores, at the urging of their counsel, Salkin, reluctantly approved the $2.4 million settlement of the MBA action. After the settlement of the MBA action, in April, 1998, some seven months later, Salkin finally informed the Lansons they should seek other individual counsel to handle the issues regarding their individual claims and interests, as she had become conflicted.

As will be set forth in more detail below, Salkin failed to disclose to the Bankruptcy court the fact that, in addition to representing Baron’s, Salkin also represented the Lansons in their individual capacities. In particular, Salkin represented the Lansons, individually, in connection with their personal guarantees of post-petition financing for Baron’s.[R-539-274-275-276] Salkin also represented the Lansons, in their individual capacities, in connection with the Bankruptcy Plan and in negotiations with the creditors regarding that Plan.

Ultimately, the Bankruptcy court approved the $2.4 million settlement of the MBA action. Norman Lanson signed the MBA release solely in his corporate capacity, and the Lansons refused to sign the MBA releases in their individual capacity. [A-1, pg. 4 & 5]

On May 18, 1998, the Bankruptcy court entered an order (the “Settlement Order”) approving Baron’s Stores settlement with MBA. The Settlement Order awarded Kopplow and Cooper a total of $600,000.00 in attorneys’ fees and $146,327.04 in costs which represented in, great part, undisclosed pre-petition fees and costs. [A -1,pg.4 & 5]

Approximately two months after the Bankruptcy court awarded Appellees’ fees, Norman Lanson informed Kopplow and Cooper, by letter dated July 8, 1998, that he disputed their fees. In response to Norman Lanson’s letter, Kopplow and Cooper filed a Motion seeking a determination of their Entitlement to Fees previously approved by the Bankruptcy court. On August 27, 1998, the Lansons, individually, filed an Affidavit in Opposition to Kopplow’s and Cooper’s Entitlement to Attorneys’ Fees in the Bankruptcy court, claiming Appellees’, Kopplow and Cooper had deceived the court by representing they had no interests adverse to the estate. [A-4][R-222]

On August 28, 1998, Salkin, in opposition to the Lansons Affidavit, wrote the Lansons counsel, Mark Osherow, a letter stating: [A-5]

“the filing of this Affidavit was very foolish. No one was going to stand up and object to the treatment of the principals of the Plan. In fact, the Committee has revised the Plan to assist the Lansons. You have now provided the Court, sua sponte, the ability to deny confirmation and require revisions to the Disclosure Statement and Plan, which could take away those negotiated efforts.”

On August 31, 1998, the Bankruptcy court held a hearing on the fee entitlement motion during which the Bankruptcy court ruled that Kopplow and Cooper were entitled to their fees. [R-224]

On September 7, 1999, a year later, the Lansons and Baron’s Stores, Inc. filed a legal malpractice action against Kopplow and Cooper and later amended to include Sonya Salkin, as a defendant. Appellant(s) alleged in 2004, in the legal malpractice action, that Appellees perpetrated a fraud on the Bankruptcy court in connection with their retention as counsel for Baron’s Stores during the Chapter 11 proceeding. In 2005, the presiding Judge in the legal malpractice action, advised the Lansons that allegations of fraud on the Bankruptcy court should be resolved by the Bankruptcy court. [A-1pg.6].

Appellant filed Answers to Interrogatories on March 30, 2005 which listed the following over sixty combined connections and/or conflicts of interest of the

Attorneys.

As to Appellee Cooper:- Represented Norman Lanson, individually, in the Morrison, Brown litigation- Represented Meryl Lanson, individually, in the Morrison, Brown litigation- Represented Baron’s Stores, Inc. in the Morrison, Brown litigation- Norman Lanson was an insider- Meryl M. Lanson was an insider- Norman Lanson was a creditor- Meryl M. Lanson was a creditor- Trace Lanson was a creditor- Norman Lanson was a Guarantor- Meryl M. Lanson was a Guarantor- Norman Lanson’s attorney in the Morrison, Brown litigation was also Ronald C. Kopplow, Marc Cooper’s co-counsel- Meryl M. Lanson’s attorney in the Morrison, Brown litigation was also Ronald C. Kopplow, Marc Cooper’s co-counsel- Baron’s Stores, Inc. attorney in the Morrison, Brown litigation was also Ronald C. Kopplow, Marc Cooper’s co-counsel- Rachlin, Cohen and Holtz was a creditor - Rachlin, Cohen and Holtz were the accounting experts in the underlying litigation against Morrison, Brown, Argiz- Rachlin Cohen and Holtz were retained at the inception of the retention of Kopplow and Cooper in the Morrison, Brown, Argiz litigation on behalf of Baron’s Stores, Inc. and Norman Lanson, individually

- Represented Norman Lanson, individually, in the bankruptcy proceedings- Represented Meryl M. Lanson, individually, in the bankruptcy proceedings- Represented the Debtor in Possession and the Debtor in Possession’s Principal Shareholder, Norman Lanson, who was also a Guarantor- Represented the Debtor in Possession and the Debtor in Possession’s shareholder, Meryl M. Lanson, who was also a Guarantor

The Bankruptcy court reopened the case on April 7, 2005 to consider the merits of the Appellants fraud claims. After a three day trial, the Bankruptcy court ultimately ruled, on April 12, 2007, that no fraud on the court had been perpetrated by the attorneys. The Bankruptcy court’s order was affirmed by the District Court below on January 7, 2008. [A-1]

The District Court committed error in failing to consider that the disclosure rules under the Bankruptcy Code are mandatory and non-discretionary. The District Court failed to address that the Attorneys lied in their sworn Affidavits claiming no connections and/or conflicts of interest when in fact there were over sixty combined connections and/or conflicts of interest amongst the Attorneys. As a result, “manifest injustice” occurred in the bankruptcy of Baron’s.

Throughout the District Court’s opinion, the focus centered on whether the Appellee’s knew Appellants had an individual claim in the MBA action, instead of on the professional’s mandatory disclosure requirements.Rule 2014 mandates that any professional seeking to render professional services in a Bankruptcy proceeding, must file an application that includes, the name of the person to be employed, the reasons for the selections, the professional services to be rendered, any proposed arrangements for compensation and to the best of the applicant’s knowledge, all of the person’s connections with the debtor, creditors, any other party in interest, their respective attorneys and accountants. The application shall be accompanied by a verified statement of the person to be employed setting forth the person’s connections with the debtor, creditors, any other party in interest, their attorneys and accountants, the United States trustee, or any person employed in the office of the United States trustee. Pursuant to the Rule, the professional must disclose, in detail “all of the person’s connections with the debtor, creditors, or any other party in interest, their respective attorneys and accountants, the United States Trustee, or any person employed in the office of the United States Trustee”, and not merely those which rise to the level of a conflict. In re: Gulf Coast Orthopedic Center, 265 B.R. 318 (N.D. Fla. 2001) also citing In re: Keller Financial Services of Florida, Inc., 243 B.R. 806 (N.D. Fla. 1999).

Further, in the In re: Gulf Coast, supra, the Court held “These disclosure requirements are not discretionary and the duty of the professional to disclose all connections with the Debtor, Debtor in possession, insider, creditors, or parties of interest, is a must, including fee arrangements.” (Emphasis added)

“The duty to disclose the professional’s connection under FRBP 2014 is a mandatory requirement and the scope of the disclosure is far broader than what is required for disqualification.”

In the case of In re: Keller Financial, supra: “A mere violation of the disclosure rule alone was enough to disqualify a professional and deny all compensation, regardless whether the undisclosed connections are fee arrangements, are materially adverse to the interest of the estate or insignificant.” See also In re: Smitty’s Truck Stop, Inc., 210 B.R. 844 (10th Cir. 1997)

Appellee Salkin, as general bankruptcy counsel to Baron’s, the debtor in possession, was required to satisfy 11 U.S.C. 327(a), which states:

“Section 327(a) of the Bankruptcy Code provides: 11 USC §327. Employment of professional persons(a) Except as otherwise provided in this section, the trustee, with the court’s approval, may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trustee’s duties under this title. 11 U.S.C. §327(a)(Emphasis supplied). The term “disinterested person” is defined in §101(14) of the Bankruptcy Code to mean a person that “does not have an interest materially adverse to the interest of the estate or any class of creditors or equity security holders, by reason of any direct or indirect relationship to, connection with, or interest in, the debtor.” [Emphasis added] (See also In re: Jennings, 199 Fed.Appx. 845 (11th Cir. 2006)

All three Appellees submitted Retention Motions and Affidavits, under the penalty of perjury, stating that they had no connections and/or conflicts of interest or held any interest adverse to the estate. [R-44,46] The Appellees committed perjury when they failed to disclose the more than sixty combined connections and/or conficts of interest between them. (A-3)

The District Court, in error, narrowly construed the seriousness of the Appellees’ non-disclosure in violation of Rule 2014 by focusing on one connection to the exclusion of at least sixty-three other connections and/or conflicts of interest.

At Page 12, of the January 7, 2008 District Court’s Order, the Court states:

“Appellants’ central argument is that Appellees represented both the Lansons and Baron’s Stores, and that the Lansons held individual claims against MBA that placed the Lansons in conflict with Baron’s Stores because both the Lansons and Baron’s Stores were seeking recovery from a common limited fund., According to Appellants, Appellees were under an obligation to disclose the conflict of simultaneously representing Baron’s Stores and the Lansons when Appellees filed their initial Motions for Retention before the bankruptcy court, or at the very least as soon as it became apparent that the Lansons and Baron’s Stores had competing interests. When Appellees failed to disclose their conflict in representing two parties with competing interests, Appellants assert Appellees committed fraud…..” [A-1]

The District Court minimized the more than sixty-four glaring conflicts of interest and/or connections of the Appellees at the inception of their retention, and their continuing duty to disclose any conflicts or connections that may have arisen during the Bankruptcy proceeding. For instance, at Page 4 of the February 15, 2008 Order Denying Appellant’s Motion for Rehearing, the District Court, relied on the bankruptcy court’s finding that there was no evidence that Kopplow and Cooper understood that they were required to disclose the attenuated relationships or connections as part of their retention as special counsel. [A-2] The District Court further relied on the bankruptcy court that there was no evidence that Salkin even knew of the relationships until after the case had been closed and the Lansons filed their legal malpractice action.[A-2]This erroneous finding is not supported by the record below.

Between March, 1998 and March, 2005, the Lansons, and three different attorneys representing the Lansons and/or Baron’s, Kopelowitz, Osherow and Zukoff, made repeated oral and written demands upon Kopplow, Cooper and Salkin to fulfill their obligation to disclose their connections and/or conflicts of interest. On March 5, 2005, Appellant sent a letter to Appellee, Salkin, (with copies to various Federal Judges and the U.S. Trustee) demanding that she fulfill her fiduciary obligation and disclose the fraud on the court perpetrated in the bankruptcy of Baron’s.[A-7]

The voluminous amount of undisclosed connections, that were intentionally omitted, is, in and of itself, sufficient evidence to support Appellant’s “fraud on the court” under bankruptcy Rule 2014. In re Etoys, Inc., 331 B.R. 176, 188 (Del.2005) [R-390 – p. 11-12]

Failure to disclose connections and conflicts-of-interest pursuant to Bankruptcy Rule of Procedure 2014 and 11 U.S.C. §327 is a fraud on the Court. In re Etoys, Inc., 331 B.R. 176, 188 (Del. 2005). “Defective disclosure is not a minor matter.” In re B.E.S. Concrete Products, Inc., 93 B.R. 228, 236 (E.D. Cal. 1988). “[S]trict compliance with Rule 2014(a) is necessary to the effective enforcement of §327(a) and (e) as this provision goes to the very heart of the bankruptcy system’s integrity.” In re Tinley Plaza Associates, L.P., 142 B.R. 272, 279 (N.D. Ill. 1992). Accordingly, “Failure to meet the requirements of Rule 2014(a) is enough by itself to disqualify an attorney and deny compensation even if no conflict of interest exists.” Id., at 278 (emphasis added). This standard is so stringent that the penalty for failing to disclose a potential, much less an actual conflict is the denial of all compensation. In re Keller Financial Services of Florida, Inc., 248 B.R. 859, 898 (M.D. Fla. 2000).

Further, disclosure of connections must be made “regardless of whether the undisclosed connections ... were materially adverse to the interests of the estate or were de minimis.” Id.. “No matter how trivial a connection appears to the professional seeking employment, it must be disclosed.” In re Begun, 162 B.R. 168, 177 (N.D. Ill. 1993). It is for this reason that “The scope of disclosure is much broader than the question of disqualification.” In re Keller, at 897. Further, “Rule 2014 has long been held to be read broadly.” In re Jore Corp., 298 B.R. 703, 725 (D. Montana). Needless to say, the Attorneys may not usurp the Court’s authority and unilaterally evaluate the significance of the connections. In re Keller, at 897. Finally, “a bankruptcy court should punish a willful failure to disclose the connections required by Fed.R.Bankr.P. 2014 as severely as an attempt to put forth a fraud upon the court.” In re Balco Equities Ltd., Inc., 345 B.R. 87, 113 (S.D.N.Y. 2006).

Although a bankruptcy court enjoys considerable discretion in evaluating whether professionals suffer from conflicts, that discretion is not limitless. A bankruptcy court does not enjoy the discretion to bypass the requirements of the Bankruptcy Code. Until proper disclosure has been made, however, it is premature to award fees for two reasons First, the bankruptcy court cannot exercise its discretion to excuse nondisclosure unless it knows what it is excusing Second, employment is a prerequisite to compensation and until there is proper disclosure it cannot be known whether the professional was validly employed. In re Triple Star Welding, Inc., 324 B.R. 778 (9th Cir. 2005).

Despite the numerous demands made upon the Attorneys to make proper disclosure since their retention in 1997, it was not until testimony during the evidentiary trial in Bankruptcy court in 2007 that Kopplow finally flippantly made any disclosure to the Bankruptcy Court.

MR. KATZMAN: “You don’t feel that those are connections, because they’re not an actual adverse interest, right?

MR. KOPPLOW: They’re not connections that are either so close in time – present or so close in time that they would have any impact or bearing on my ability to be independent and continue to bring the claim of Baron’s against Morrison Brown.

MR. KATZMAN: Shouldn’t the Judge have been given the opportunity to make that decision by at least knowing that you used to represent folks who are creditors and owners of creditors of Baron’s?

MR. KOPPLOW: We’re telling him that today.”

R-539-210].

In the case of U.S. v. Gellene, 182 F.3d 578 (7th Cir. 1999), the Court found, that although Gellene made some disclosure, he did not fully disclose his connections and withheld the information over a two year period which not only was in violation of Rule 2014 but resulted in a conviction of bankruptcy fraud, served a jail sentence, was fined, and was disbarred. The Attorneys below made no disclosure but filed a boilerplate verified statement that they had no connections and/or conflicts of interest. The disclosure requirements are not satisfied with generalizations or boilerplate admonitions. Such generalizations, at best, cover inadvertent omissions of insignificant connections. They do not adequately disclose known or future connections, particularly with entities who are creditors, litigation targets or professionals associated with the debtor. In re Granite Partners, 219 B..R. at 34-36.

The District Court’s misplaced reliance on the Bankruptcy Court’s erroneous finding that, because the Appellees’ did not know the Lansons had individual claims against MBA, Appellees’ did not have the intent to deceive the Court. (A-1,pg.13). Such a finding turns the mandatory disclosure requirements under Bankruptcy Rule 2014 on its head and renders it meaningless.

B. THE DISTRICT COURT ABUSED ITS DISCRETION IN FAILING TO CONSIDER APPELLEE’S SALKIN’S PATENT ADMISSION OF HER INTENTIONAL NON-DISCLOSURE IN THE BANKRUPTCY PROCEEDING, AS EVIDENCE OF HER INTENT TO PERPETRATE A FRAUD ON THE COURT

Appellee, Salkin, not only was Debtor’s Counsel, but at that time and presently, Salkin was and remains a Panel 7 United States Bankruptcy Trustee for Region 21. In such capacity, Salkin is charged with a higher fiduciary obligation and should be intimately familiar with the mandatory disclosure rules under the Bankruptcy Code.

Salkin, as a Chapter 7 Trustee and as the fiduciary for the Debtor in possession , is held to a very high standard of honesty and loyalty. Woods v. City National Bank & Trust Co., 312 U.S. 262, 278 (1941); Moser v. Darrow, 341 U.S. 267 (1951); In re: Peckinpaugh, 50 B.R. 865 (N.D. Ohio 1985).

THE TIMELINE OF EVENTS IS SUFFICIENT EVIDENCE OF APPELLEES INTENT TO DEFRAUD THE COURT:

August 27, 1998 Meryl Lanson and Norman Lanson, through attorney Osherow, file an Affidavit (Entitlement to Fees) in Bankruptcy Court alerting the Court to the conflicts of Kopplow and Cooper (Service List of Affidavit put all professionals, including the U.S. Trustee, on notice). [A-4]

August 28, 1998 Sonya Salkin, Esq., sent letter to Osherow, with copies to Kopplow and Cooper, stating that the “filing of the Affidavit was a very foolish thing” and states:

“No one was going to stand up and object to the treatment of the principals of the Plan. In fact, the Committee has revised the Plan to add language to assist the Lansons. You have now provided the Court, sua sponte, the ability to deny confirmation and require revisions to the disclosure statements and plan, which could take away those negotiated efforts.” [A-5]

August 30, 1998 Osherow sends letter to Salkin and states:

“I am in receipt of your correspondence dated August 28, 1998,...

Suffice it to say, that what is transpiring at this point should have been taken care of earlier. The only consideration that I can glean from your letter, is that you think it is appropriate that the Court should not be aware of the facts as my clients perceives them. The Court has a right, and should know, and the attorneys have an obligation to provide all pertinent information so that the Court can make an informed decision as to anything that may transpire. [A-6]

August 31, 1998 During the Hearing on the Appellant’s Affidavit objecting to the Appellees’ fees based on their non-disclosure, all professionals remained silent in Court as to the conflicts of interest of Kopplow and Cooper.

The above admission is clear and convincing evidence that Salkin, with the approval of Kopplow and Cooper, engaged in a pre-meditated, unconscionable scheme, by preventing the Court from having the information necessary to make an informed decision. The unconscionable scheme was to continue to hide the connections and/or conflicts of interest of Kopplow, Cooper and Salkin, for their own financial gain, and to the detriment of the beneficiaries of the estate, the Creditors and the Debtor.

In light of the letter Salkin wrote to Osherow, it is obvious that, at that time, Salkin was sensitive to the issue of conflicts – although she did not share her concerns with the Court. It is therefore all the more evident that when Salkin represented to Bank Atlantic that she was the attorney for the Lansons, individually, and that she did so in the belief that she was the attorney for the Lansons. [A-9; R-532-Exh.31] The Court overlooked the fact that in doing so, Salkin was necessarily cognizant of the conflict and of the necessity to disclose that conflict to the Court.

On page 6 of the District Court’s Order, the Court makes reference that the Lansons did not appeal or seek a rehearing of the August 31, 1998 hearing on the fee entitlement motion. Appellee, Salkin, should have been acutely aware of the fiduciary duties she was charged with in Baron’s to look after the best interests of both the Debtor and Creditors and yet sat silent, knowing all along of the professionals undisclosed conflicts of interest. Ms. Salkin should have sought a rehearing or an appeal of this order on behalf of Baron’s and its Creditors. Appellee Salkin’s failure to appeal or seek a rehearing is a continuation of the Appellees’ unconscionable scheme depriving the Court of the necessary information it was entitled to receive in order to have made an informed decision.

C. Appellant’s Due Process Rights were violated when the District Court affirmed the Bankrptcy Court’s, sua sponte, expansion of inquiry to include the Attorneys’ subjective intent, on the last day of trial.

On September 29, 2006, the Bankruptcy Court denied Appellees’ Motion for Protective Order, as moot, in that the Court bifurcated the trial into liability and remedy negating the necessity for the Appellant to depose approximately nineteen fact witnesses prior to the trial. Three months later, at a pre-trial hearing on January 8, 2007, the Court substantiated his bifurcation by narrowing the scope to what was disclosed and what should have been disclosed. Quoting directly from the January 8, 2007 pre-trial hearing transcript: [A-8,pg. 11 & 23].The Court: “I’ll tell you now, the only issue is disclosure. What should have been disclosed, and what was disclosed, that’s the issue before me.”

The Court: “Does anyone dispute that the issue before me, not in State Court, but before me, is what was disclosed and what should have been disclosed?” [A-8,pg. 11 & 23].

Even though the record is replete of Appellees’ subjective intent or “motive,” as it stands, the District Court erred in failing to consider the Bankruptcy Court’s sua sponte expansion of the narrow scope of disclosure to include the Appellees’ subjective intent, depriving the Appellants of meaningful discovery on that issue.

Ironically, this same Bankruptcy court, when faced with the same issue of whether or not a professional failed to make proper disclosure, found clear and convincing evidence of fraud on the court based on one undisclosed connection. Subjective intent was never mentioned in the twelve page opinion. In re Walker, 2004 WL 3152787(S.D. Fla.) Emphasis added. This Court recently affirmed the Bankruptcy Court’s decision and stated: “Lying under oath is lying under oath.” Walden v. Walker, 515 F.3d 1204 (11th Cir. 2008). The District Court in its February 15, 2008 Order stated Appellants have not shown clear error or manifest injustice. Black’s Law Dictionary defines “manifest injustice” as an error in the trial court that is direct, obvious, and observable as Bankruptcy Rule 2014 is mandatory, not discretionary, and cannot be left to the professionals to decide what to disclose and what not to disclose. (As argued above). Additionally, this Circuit held in order to demonstrate manifest injustice a party must show: (1) there was error; (2) that was plain; (3) that affected the parties substantial rights and (4) that affected the fundamental fairness of the proceedings. United States v.Quintana, 300 F.3d 1277 (11th Cir. 2002). As a result of the manifest injustice in the bankruptcy of Baron’s, a fifty-two year old company was destroyed, more than two hundred loyal employees became unemployed, creditors were damaged, the Appellant and her family’s livelihood was stolen from them, all because the professionals broke the cardinal principle of Rule 2014(a) when they arrogated to themselves a disclosure decision that the Court must make in order to protect their ill-gotten fees. Ten years ago, in 1998, pre-confirmation, this situation could have and should have been rectified, but was not because the Attorneys sat silent at a hearing depriving the Court of the information necessary at that time to prevent the manifest injustice that has been ongoing for a decade. Ten years later, in 2008, Appellant is still seeking a remedy for this manifest injustice.CONCLUSION For all the foregoing reasons, stated above, this Honorable Court should enter an Order vacating the District Court’s affirmance of the Bankruptcy Court’s finding that Attorneys did not perpetrate a fraud on the court in violation of the mandatory disclosure rules under the bankruptcy code.

WHEREFORE, the Appellant respectfully requests this Court to vacate the District Court’s Order and remand with instructions for further proceedings, and award any other further relief this Honorable Court deems appropriate.

CERTIFICATE OF COMPLIANCE

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